I have been pointing this out for YEARS! Even 5 years ago, my friends and family who work for Comcast told me that Comcast only spends about 5 dollars per 500GB's! They are getting GROSSELY overpaid and are only able to charge those prices because they are a de-facto government authorized monopoly.

We NEED LINESHARING! That would allow more people to get into the market and give the cable and fiber-optic ISP's some real competition.

Amazon charges me $0.03/GB to move data to and from S3, and they seem to be doing peachy with that model. I'd be fine if ISPs were considering *reasonable* metered bandwidth rates, but what they're really looking to do is reduce the amount of things you do on the internet and push you towards their "value add" products.

If it really costs only 1 cent for my ISP to deliver me 1 gig of data, and they insist on charging by the GB, then I have a generous proposal: Charge me the real cost (1 cent) x 10 per gigabyte.

This would mean that Comcast could collect up to $25 with their 250GB cap, and a 10X markup on real costs should more than cover maintenance and upgrades. As it is, I'm paying more than twice that to them right now, and coming nowhere near the 250GB cap...

When my (cable) internet provided instituted a FIVE dollar/gb overage fee, that was it: I left.

The downside is the only alternative in my area of town (DSL) is 1mb/s down.

But you know what? 1mb/s down is enough for watching most TV shows and movies via Watch Now (need to make sure the laptop isn't using any bandwidth, of course; and you might want to avoid the special effects extravaganzas, but that's why I'm still signed up for 2 discs at a time). The video is noticeably compressed, but it just wasn't worth the cost to me anymore.

So it sounds like Netflix is fine with metered billing, as long as the cost stays below $1/GB.

The other thing is, it almost sounds like Netflix doesn't understand how the internet is designed. They're basically saying "water is free, why should the water company charge me more when there are a thousand people in my neighborhood than when I just lived out here alone." It's because now they have to install 18 inch mains to keep the pressure on the network acceptable.

The problem is not *that* there is a GB in the pipes, it's that there is a finite capacity and an elastic demand that at peaks is growing faster than revenues. If I'm a bank looking at buying an AT&T long term debt offering to back installation of a fibre network, and they're projecting declining revenues against increased capacity I'll say "no thanks" until the offering gets up to about 14%, at which point AT&T is losing about $10B a year.

I live in a city with a population of 300,000+. We have ONE local cable internet provider. The monthly cap for the cheapest plan (45 dollars) is 4.5 gigabyte with a cost of $5.12 per gigabyte beyond that. And this ISP receives millions every year from the federal government to build out their network throughout the state.

So it sounds like Netflix is fine with metered billing, as long as the cost stays below $1/GB.

The other thing is, it almost sounds like Netflix doesn't understand how the internet is designed. They're basically saying "water is free, why should the water company charge me more when there are a thousand people in my neighborhood than when I just lived out here alone." It's because now they have to install 18 inch mains to keep the pressure on the network acceptable.

The problem is not *that* there is a GB in the pipes, it's that there is a finite capacity and an elastic demand that at peaks is growing faster than revenues. If I'm a bank looking at buying an AT&T long term debt offering to back installation of a fibre network, and they're projecting declining revenues against increased capacity I'll say "no thanks" until the offering gets up to about 14%, at which point AT&T is losing about $10B a year.

You do know that the major ISPs are making incredible profits, right? It's not like they are going to go out of business if they actually make consumers happy by offering more bandwidth at a smaller cost. Of course, they would never do this given their near-monopolistic positions in most areas.

The problem is that this article (and users in general) fail to acknowledge that a gigabyte is not a gigabyte is not a gigabyte.

As we move towards more and more VoD delivery (Netflix, Hulu, etc.) over the internet, you're going to find that a gigabyte of data between, say, 6pm and 10pm local time will (and should!) cost a LOT more than a gigabyte at 3am or even 1pm. Cable operators, and most ISPs, for that matter, oversell their "middle mile" bandwidth. They can easily handle 20Mbps bursts from any given customer, but they cannot necessarily handle even 2Mbps-3Mbps sustained downloads from the bulk of their customers at once, for hours. Their network wasn't built for that use.

Fixing it will cost money. The key is to figure out how to get the users who make fixing it necessary to pay for it. There are plenty of ways...straight-up caps/overage charges are the easiest. I prefer caps/throttling, where you still get usable (say 512k/512k) bandwidth after you hit your cap. Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

So it sounds like Netflix is fine with metered billing, as long as the cost stays below $1/GB.

The other thing is, it almost sounds like Netflix doesn't understand how the internet is designed. They're basically saying "water is free, why should the water company charge me more when there are a thousand people in my neighborhood than when I just lived out here alone." It's because now they have to install 18 inch mains to keep the pressure on the network acceptable.

The problem is not *that* there is a GB in the pipes, it's that there is a finite capacity and an elastic demand that at peaks is growing faster than revenues. If I'm a bank looking at buying an AT&T long term debt offering to back installation of a fibre network, and they're projecting declining revenues against increased capacity I'll say "no thanks" until the offering gets up to about 14%, at which point AT&T is losing about $10B a year.

You do know that the major ISPs are making incredible profits, right? It's not like they are going to go out of business if they actually make consumers happy by offering more bandwidth at a smaller cost. Of course, they would never do this given their near-monopolistic positions in most areas.

I have an idea, nationalize broadband by making every Post Office a fiber node. This way, the government can make money in a failing system (snail mail), and they already have the land, building, and personal to do the job. Oh, and most communities, even rural ones, have some form of PO.

Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

Obvious response: said methods of acquiring content ahead of time are almost always illegal. With few exceptions the only way to watch commercial content online legally is via streaming, so you'd need to get EVERYBODY to allow queuing.

Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

Obvious response: said methods of acquiring content ahead of time are almost always illegal. With few exceptions the only way to watch commercial content online legally is via streaming, so you'd need to get EVERYBODY to allow queuing.

Excuse me? Downloaded content is "almost always illegal"? Have you not heard of the iTunes store, or Amazon VoD?

The problem is that this article (and users in general) fail to acknowledge that a gigabyte is not a gigabyte is not a gigabyte.

As we move towards more and more VoD delivery (Netflix, Hulu, etc.) over the internet, you're going to find that a gigabyte of data between, say, 6pm and 10pm local time will (and should!) cost a LOT more than a gigabyte at 3am or even 1pm. Cable operators, and most ISPs, for that matter, oversell their "middle mile" bandwidth. They can easily handle 20Mbps bursts from any given customer, but they cannot necessarily handle even 2Mbps-3Mbps sustained downloads from the bulk of their customers at once, for hours. Their network wasn't built for that use.

Fixing it will cost money. The key is to figure out how to get the users who make fixing it necessary to pay for it. There are plenty of ways...straight-up caps/overage charges are the easiest. I prefer caps/throttling, where you still get usable (say 512k/512k) bandwidth after you hit your cap. Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

That is largely true. But that's a failure on THEIR part. Not the consumers. The problem with their proposals that I see from the other side is that it allows them to monitize a artificially created scarcity, rather than provide an incentive them to add more bandwidth to HANDLE that constant 2-3 mbps stream.

Also in the case of cable your argument is a little disingenuous. Thanks to DOCISS there is very little difference between the television signals I receive from Comcast for instance, or packet stream from Netflix as long as the information is streaming from a CDN or quasi-CDN, which is delivering information as close to the requester as possible to minimize network impact.

These are issues that have already largely been solved. Also they are in addition to modifying their cost structures talking about potentially aggressive traffic shaping which does make a gigabyte a gigabyte regardless of the time, since if the network is congested, and your data in a shaped class, then it may or may not get there depending on how the buffer runs...

I don't know I don't find this argument compelling. It's a solveable issue. Every ISP I can choose from demands a massive fee that I have to pay every month regardless of how much data I actually consume. If they want to move to a pay to play system, that's fine, but link the amount I'm paying to their costs then.

I agree with Netflix on this one, the point isn't being fair to the consumer. Because, if they ever did change their billing, and took a 1000% margin, I would pay LESS than my current monthly fee, assuming streaming standard quality Netflix 24/7, assuming the wholesale GB prices I can search for are correct.

I've noticed as of late Ars seems to be doing a lot more social engineering work for the isp's, calling caps "huge" and stuff; I've only noticed this in the last ...8 months maybe. Must have business ties up there with Conde.

Anyways for people to know and which is not included in the article but should for reference, here in Canada 3rd party isp resellers like TechSavvy have said on record bandwidth cost only 1-3 cents per gigabyte. It's not only a ripoff, it's a monumentally huge one one of epic proportions, and no cap is "huge" at that price.

Awesome comment I found on Reddit:

Graysdir

"UBB" (Usage Based Billing) - Otherwise known as METERED BILLING. The CRTC is allowing ISPs to put a METER on your internet access, so you PAY BY THE BYTE!

"an economic disincentive for internet use" since the charges levied by Bell Canada are "many, many, many times what it costs to actually deliver it."

The CEO of Teksavvy ISP said:

"UBB is pure profit. IP transport of internet data is somewhere between $3 and $10/Mbps for companies like ours.... So doing basic math we're talking of $3-$10 per 300GB of data... So 1 to 3 pennies per gig of downloading on the Internet transit side."

Shaw uses misleading information, and tells customers that their limits are generous, and overstates the cost of bandwidth. In fact, bandwidth is 1-3 PENNIES per GB, but Shaw is charging $2 PER GB!

Did you know that just as Shaw began charging for "overuse of the internet", they also (quietly) reduced all of their usage caps by 30% without telling customers?

Funny part is, the infrastructure most of these ISPs use was FUNDED BY CANADIANS! Now they are charging us massive overage fees for using it.

Shaw, and other Canadian ISPs are using UBB as a method to control access to their TV competitors, ie: Netflix, Hulu, etc. It is clearly a conflict of interest to allow a TV Broadcaster who is also an ISP, to limit our access to their competition.

With these massive new overage fees, once you are over your recently lowered "usage cap" with Shaw, every HD Netflix movie will cost you an extra $8!

If you want to contact your local MP, and ask them what THEY are doing to prevent the destruction of the Canadian internet, please send them a FAX or written letter. You can find out who your local representative is here: http://howdtheyvote.ca/findmember.php

They can easily handle 20Mbps bursts from any given customer, but they cannot necessarily handle even 2Mbps-3Mbps sustained downloads from the bulk of their customers at once, for hours. Their network wasn't built for that use.

Fixing it will cost money. The key is to figure out how to get the users who make fixing it necessary to pay for it.

Gee, here's an idea - instead of trying to come up with more creative ways of bending over their customers, maybe they could take the fat stacks of cash they've accumulated from their government-sponsored monopolies and actually reinvest it in their infrastructure. Crazy, I know.

I disagree with Netflix. ISPs need to deliver on a cost-plus basis. The market is distorted, but Netflix wants to distort it the other way.

$20/mo + $0.05 per GB sounds about right to me.

(also props to mandatory line sharing)

According to the quote in the article (note: I haven't read the PDF), Netflix is just pointing out that ISP's costs per gigabyte, after the fixed cost of infrastructure & equipment, is extremely small and overage costs that some ISP's are charging (or wanting to charge) bears little to no relation to their ACTUAL costs. According to the article they aren't saying that ISP's need to start charging at their actual costs per gigabyte delivered (leaving out the infrastructure costs), but saying that whatever costs there are need to bear a relation to that.

I'm happy to consider paying a fixed cost plus a charge that bears a relation (and not an excessive one) for cost per gigabyte. If an ISP puts on a data cap, and tries to charge me $1 per gigabyte, while their costs are LESS than $0.01 (yes, less than a penny!), there is pretty much no relation. If they wanted to charge me $0.10 per gigabyte, I feel that's potentially excessive, but at that rate it would bear a relation to their actual costs.

The problem is that this article (and users in general) fail to acknowledge that a gigabyte is not a gigabyte is not a gigabyte.

As we move towards more and more VoD delivery (Netflix, Hulu, etc.) over the internet, you're going to find that a gigabyte of data between, say, 6pm and 10pm local time will (and should!) cost a LOT more than a gigabyte at 3am or even 1pm. Cable operators, and most ISPs, for that matter, oversell their "middle mile" bandwidth. They can easily handle 20Mbps bursts from any given customer, but they cannot necessarily handle even 2Mbps-3Mbps sustained downloads from the bulk of their customers at once, for hours. Their network wasn't built for that use.

Fixing it will cost money. The key is to figure out how to get the users who make fixing it necessary to pay for it. There are plenty of ways...straight-up caps/overage charges are the easiest. I prefer caps/throttling, where you still get usable (say 512k/512k) bandwidth after you hit your cap. Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

Cost money? What the hell have I been sending money to Time Warner for? Here are a few facts from Time Warners last annual report:

They had a substantial increase in customers from the previous year.

They spent less on equipment, even with the new customers, than they did the year before.

They spent less on bandwidth, even though they used much more, than they did they year before.

the bottom line: They made a higher percentage of profits than they did the year before.

Got check their last 5 annual reports. They all read exactly the same. Increased profit margins. And you know what the assholes did at the end of 2010: they raised by bill a god damn 10%. They're crooks, pure and simple.

Those overages are ridiculous. I'm at about 40gb/mo usage. Thankfully my contract is unlimited. The wireless carriers are the worst. My 3g contract is unlimited for now, but if I want to get a 4g modem I'll have to switch to a 5gb or 10gb plan. At $10/gb (let alone $1/gb....) it'll cost me $380/mo with the 10gb plan.

Saddest thing of all is that since i'm in one of those "last-mile" areas, I don't have another choice.

I'm not persuaded by this argument. Sure, if you view the system as mostly static, marginal costs are pretty significant, particularly when Comcast gets the data put on their network for free. But, capital costs are pretty expensive. ISPs aren't going from DOCSIS 1 to 2 to 3 because of my grandma checking email a couple times a day, nor are they upgrading their backhaul capacity because of her. I think it makes sense to charge heavy data users more to cover the capital improvements they make necessary.

If implemented correctly, I think metering could work. I think data cap tiers are incredibly consumer-unfriendly, because they are almost always accompanied by ridiculous overage charges. But metering works fine with electricity- people who put more strain on the grid pay more, but no is concerned that their power usage is going to hit some magical level causing their bill to shoot through the roof.

Plus, metered pricing actually gives ISPs an incentive to provide better service to data-hungry users. In an all-you-can-eat model, the ISP has a pretty clear incentive to try to limit your usage. If they can actually make more money off of people streaming Netflix movies versus people just checking their email the ISPs will be much more friendly to customers and service providers alike.

I have an idea, nationalize broadband by making every Post Office a fiber node. This way, the government can make money in a failing system (snail mail), and they already have the land, building, and personal to do the job. Oh, and most communities, even rural ones, have some form of PO.

Of course, I said this when 33k was the best thing ever.

Fun fact, the United States Post Office is an independent agency of the government, and has not recieved taxpayer dollars since the 1980s

Does the $0.01/GB factor in the costs of employing people to maintain the network, and leave profit room for expanding the network? I don't doubt that the ISPs are overcharging, but it's not like you can just take the electricity cost of delivering a GB and say the rest is profit.

Plus, metered pricing actually gives ISPs an incentive to provide better service to data-hungry users. In an all-you-can-eat model, the ISP has a pretty clear incentive to try to limit your usage. If they can actually make more money off of people streaming Netflix movies versus people just checking their email the ISPs will be much more friendly to customers and service providers alike.

I can only conclude that you don't live in California. The last decade in California has proved that metered billing is in no way a sufficient condition to invest in necessary capacity. We've even had power companies shut down plants during peak usage to slash available supply and gouge price per unit.

As with electricity, without strong competition or government regulation of rates, metered internet is first and foremost a way to dictate profit margins. Distributing operational costs more appropriately is a distant secondary objective.

If I start bumping into the new caps I'm going to cancel the CableTV portion of my cable bill and just pay overages once in a while. It'll be much cheaper for me, and it will adversely affect the cable company even more. Switching to the other provider won't help as they have caps too.

Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

Obvious response: said methods of acquiring content ahead of time are almost always illegal. With few exceptions the only way to watch commercial content online legally is via streaming, so you'd need to get EVERYBODY to allow queuing.

Excuse me? Downloaded content is "almost always illegal"? Have you not heard of the iTunes store, or Amazon VoD?

Got check their last 5 annual reports. They all read exactly the same. Increased profit margins. And you know what the assholes did at the end of 2010: they raised by bill a god damn 10%. They're crooks, pure and simple.

10 years ago I paid $30/month for 10/1 from TWC, now it's $55/month for 10/1. what the fuck am I paying for? the only infrastructure upgrade I noticed was the one that fixed the months-long regional issue of it dropping to dialup speeds at prime time.

JEDIDIAH wrote:

...both of which use streaming models.

That's where the oD part of Amazon VoD comes from.

Amazon also has an offline player that downloads a high-quality version.

Does the $0.01/GB factor in the costs of employing people to maintain the network, and leave profit room for expanding the network? I don't doubt that the ISPs are overcharging, but it's not like you can just take the electricity cost of delivering a GB and say the rest is profit.

No, the outrageous monthly charge just for having an internet connection covers all of those things. These fuckers want MORE money on top of that.

I'm not persuaded by this argument. Sure, if you view the system as mostly static, marginal costs are pretty significant, particularly when Comcast gets the data put on their network for free. But, capital costs are pretty expensive. ISPs aren't going from DOCSIS 1 to 2 to 3 because of my grandma checking email a couple times a day, nor are they upgrading their backhaul capacity because of her. I think it makes sense to charge heavy data users more to cover the capital improvements they make necessary.

If implemented correctly, I think metering could work. I think data cap tiers are incredibly consumer-unfriendly, because they are almost always accompanied by ridiculous overage charges. But metering works fine with electricity- people who put more strain on the grid pay more, but no is concerned that their power usage is going to hit some magical level causing their bill to shoot through the roof.

Plus, metered pricing actually gives ISPs an incentive to provide better service to data-hungry users. In an all-you-can-eat model, the ISP has a pretty clear incentive to try to limit your usage. If they can actually make more money off of people streaming Netflix movies versus people just checking their email the ISPs will be much more friendly to customers and service providers alike.

I have Cox. (Aptly named) They charge me oodles of money to maintain the cable connection to my house for TV. Basically, there is little to no overhead for the internet. If a storm takes down cables, the TV AND the internet are out. Not just the internet. Data caps are a way for a monopoly to keep us down.

Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

Obvious response: said methods of acquiring content ahead of time are almost always illegal. With few exceptions the only way to watch commercial content online legally is via streaming, so you'd need to get EVERYBODY to allow queuing.

Excuse me? Downloaded content is "almost always illegal"? Have you not heard of the iTunes store, or Amazon VoD?

...both of which use streaming models.

That's where the oD part of Amazon VoD comes from.

iTunes is pure streaming? Was that an attempt at a joke? Nearly all of the content on iTunes is download only.

I'm not persuaded by this argument. Sure, if you view the system as mostly static, marginal costs are pretty significant, particularly when Comcast gets the data put on their network for free. But, capital costs are pretty expensive. ISPs aren't going from DOCSIS 1 to 2 to 3 because of my grandma checking email a couple times a day, nor are they upgrading their backhaul capacity because of her. I think it makes sense to charge heavy data users more to cover the capital improvements they make necessary.

Except that the DOCSIS upgrade is largely software, not hardware. So it's not like they're buying in routers and such.

Quote:

If implemented correctly, I think metering could work. I think data cap tiers are incredibly consumer-unfriendly, because they are almost always accompanied by ridiculous overage charges. But metering works fine with electricity- people who put more strain on the grid pay more, but no is concerned that their power usage is going to hit some magical level causing their bill to shoot through the roof.

Yes, it could, but only if the costs are reasonable. If line costs are $0.01/GB, and maintenance works out to say $0.05/GB, then $0.10/GB is reasonable. $1.00, $0.50, or $0.20 are not.

Quote:

Plus, metered pricing actually gives ISPs an incentive to provide better service to data-hungry users. In an all-you-can-eat model, the ISP has a pretty clear incentive to try to limit your usage. If they can actually make more money off of people streaming Netflix movies versus people just checking their email the ISPs will be much more friendly to customers and service providers alike.

See comment above. However, add that the companies should be held to performance and availability requirements, much like pwer companies. Guess what? If your power goes out for a week and the generator station hasn't been damaged by an Act of God, your power supplier is probably in deep doodoo.

Or you could even set up a peak-hour cap (and peak-hour throttling), allowing unlimited downloads at 3am for those who can find a way to think ahead on their TV viewing (and Netflix needs to figure out a way to let people queue up movies for later).

Obvious response: said methods of acquiring content ahead of time are almost always illegal. With few exceptions the only way to watch commercial content online legally is via streaming, so you'd need to get EVERYBODY to allow queuing.

Excuse me? Downloaded content is "almost always illegal"? Have you not heard of the iTunes store, or Amazon VoD?

...both of which use streaming models.

That's where the oD part of Amazon VoD comes from.

iTunes is download-only, and Amazon offers downloads as well (even for rentals). Plus, I’ll add Steam to that list.

The last decade in California has proved that metered billing is in no way a sufficient condition to invest in necessary capacity. We've even had power companies shut down plants during peak usage to slash available supply and gouge price per unit.

As with electricity, without strong competition or government regulation of rates, metered internet is first and foremost a way to dictate profit margins. Distributing operational costs more appropriately is a distant secondary objective.

This.

Fiber is a natural monopoly. It needs to be either regulated or nationalized.